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2015 (11) TMI 1441 - ITAT DELHI

2015 (11) TMI 1441 - ITAT DELHI - TMI - Disallowance of proportionate interest - AO disallowed interest paid to HDFC Bank on car loan on the basis that the assessee had made huge interest free advances - Held that:- It is now a well established proposition of law that when assessee was having an adequate non-interest bearing fund, disallowance of interest paid on borrowed fund cannot be made since in such a case, there was no nexus between the advance given and borrowals made by the assessee. It .....

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en the assessee himself had disallowed the expenditure incurred on the management of its portfolio for earning the dividend income, the Assessing Officer had to record his satisfaction first that the expenditure shown by the assessee for earning the dividend income was not satisfactory before invoking the provisions of section 14A of the Income-tax Act, 1961 read with Rule 8D of the I.T. Rules to make disallowance there under. In absence of the compliance of such mandatory requirement, the Asses .....

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d CIT(Appeals) is bad in law and on facts: 2. That the Learned CIT(Appeals) has erred in confirming the assessment of the income of the assessee at ₹ 18.63,90,250 as against the returned income of ₹ 18,54,95,430/-/ 3. That under the facts and circumstances of the case and in law, the Learned CIT(Appeals) has erred in confirming the disallowance of ₹ 1,18,675 out of the interest expenses incurred on borrowed funds pertaining to higher purchase of car. 4. That the Learned CIT(App .....

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tion 14A the burden is on A.O. to establish a proximate nexus between the exempt income and the expenses incurred thereon before making any disallowance. 2. Besides above, the assessee has also moved an application for allowing the following additional ground for the adjudication of the ITAT: On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in confirming the disallowance of ₹ 2,97,684 made by the Assessing Officer invoking the provisions of sec. 14A rea .....

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essee. 4. We are, however, of the view that since the issue is arising out of the First Appellate Order and raised in the revised grounds before the ITAT, there is no need to raise it again as additional ground before the ITAT, especially when the Learned CIT(Appeals) has dealt with the issue. As to whether the learned counsel appearing before the first appellate authority was authorized by the assessee to withdraw the issue raised in the ground will be considered while deciding ground Nos. 4 to .....

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st expenses of ₹ 1,18,675 on account of secure loan taken for the vehicle. The Assessing Officer asked the assessee to justify the claimed expenses in view of the fact that the assessee had made interest free advance of ₹ 8.89 crores. The assessee furnished his reply but the Assessing Officer did not agree with it and accordingly he disallowed the claimed expenses of ₹ 1,18,675. 7. The Assessing Officer also made disallowance of ₹ 2,97,684 under sec. 14A of the Income-tax .....

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Bank on car loan on the basis that the assessee had made huge interest free advances. He disallowed the proportionate interest, which has been upheld by the Learned CIT(Appeals). 10. In support of the ground, the Learned AR submitted that it is not the case of the Assessing Officer that assessee had diverted any interest bearing funds to some parties and had not charged any interest. The assessee admittedly had advanced the fund from own capital, hence, there was no any question of making the ab .....

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e Learned Senior DR on the other hand tried to justify the orders of the authorities below on the issue. He contended that assessee had not explained what was the necessity to take the loan for purchasing of the car when the assessee was having sufficient funds available. Thus, taking of the loan was not commercial expediency. 12. Considering the above submission, we are of the view that it is now a well established proposition of law that when assessee was having an adequate non-interest bearin .....

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Officer made disallowance of ₹ 2,97,684 under sec. 14A read with Rule 8D. The same has been upheld by the Learned CIT(Appeals) with this finding that this ground of appeal raised before him was not pressed. 14. The Learned AR submitted that the assessee has never instructed his counsel appearing before the Learned CIT(Appeals) as not to contest the issue of disallowance made under sec. 14A of the Income-tax Act, 1961 read with Rule 8D of I.T. Rules, 1962. The learned counsel appearing bef .....

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s regard, the Learned AR cited decision of Hon'ble Madhya Pradesh High Court in the case of Mahavir Prasad Jain reported in 172 ITR 231. The Learned AR submitted further that it is also a settled position of law that there would be no estoppels against the statute and if an income is not taxable under the four corners of income-tax law, the same cannot be made taxable because of the mistake of the assessee. In support, he cited the judgment of Hon'ble Supreme Court in the case of CIT vs. .....

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x law, a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the ITO has no power to impose tax on the said income. 15. The Learned AR also referred the decision of Hon ble jurisdictional High Court of Delhi in the case of CIT vs. Bharat General Insurance - 81 ITR 303 (Delhi) in support of the above contentions. The Learned AR submitted further that when substantial justice and technical consideration have pitted against each other, then, the cause of .....

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ores as exempt income is factually incorrect. He referred page No. 21 of the paper book i.e. copy of Schedule E-I of the audit report furnishing the details of exempt income i.e. income not to be included in total income with the submission that the assessee had earned an amount of ₹ 15.69 lacs as dividend income. He submitted that the dividend income was shown as net income after deducting the expenditure incurred on it by the profile manager of the assessee i.e. Societe Generale (Corpora .....

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hares - 310 ITR 421 (S.C); ii) Sesa Goa Ltd. vs. JCIT - 60 SOT 121 (Panaji); iii) Joint Investment (P) Ltd. vs. CIT (2015) - 92 CCH 088 (Delhi); 17. The Learned AR submitted that the assessee had produced his books of account before the Assessing Officer during the course of assessment proceedings and the same were examined, however, the Assessing Officer did not record its satisfaction that the book results of the assessee are not trustworthy. As per the ratio of the above cited decisions, the .....

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